Herbalife has just admitted in a disclosure filed hours ago that it is still being investigated by the Securities and Exchange Commission and the Department of Justice. Even worse for Herbalife is the fact that the investigation seems to have narrowed in on the company’s largest and fastest growing market: China. These are two ongoing investigations that only QTR exclusively warned were not over back in February of 2016, despite professional sell side cheerleader (and self-admitted Herbalife distributor) Tim Ramey claimed the SEC investigation ended in mid-2015. The Chinese market is by far almost singlehandedly keeping the company growing at this point and Herbalife needs China to perform in order to have any chance for real growth in coming years.

The confidential information memorandum to the company’s proposed refinancing gives a look at the business as it stands today. In addition to lowering guidance and expectations across the board, page 26 stood out.

Herbalife

The company is acknowledging ongoing “anti-corruption compliance” investigations from both the SEC and the Department of Justice. For years, it has been alleged that Herbalife is running an illegal business model in China, a country that accounted for almost 20% of total Herbalife sales in 2016.

QTR reported on the potential impact of losing China’s growth for Herbalife going forward. For those not interested in doing their own analysis, the simple answer is that it would be absolutely devastating. On top of having their U.S. business curtailed significantly by recent FTC sanctions, any vulnerability in China could be catastrophic.

At a time when many thought regulatory action against the company was just coming to a close, it looks at though the opposite could be true: things could just be getting started.